A report from the auditor general of Illinois found that the state’s Department of Insurance did not perform examinations of the 656 police and firefighters pension funds every three years as required by law.
The audit found that 383 of the pensions, or 58%, were examined only once by the Public Pension Division of Illinois’ Department of Insurance between 2004 and 2018, and that 230 of the pensions, or 35%, were only examined twice during the same 14-year period. And only two of the pensions were examined three times in that time. All 656 pensions should have been examined at least four times between 2004 and 2018.
The auditor general recommended the Department of Insurance perform the pension fund examinations every three years as required by law, and that the director appoint a chief internal auditor and ensure a full-time program of internal auditing is in place. It also said that if another agency is used to supplement internal audit functions, the department should obtain written approval of the governor for these services and ensure such services are provided in accordance with the law.
Additionally, the auditor general suggested the department implement policies and procedures to track internal audit costs, maintain documentation that adequately tracks the costs of the department’s internal audit function, and ensure other agencies providing services are only reimbursed for allowable costs. And it said the department should not grant another agency the authority to process payroll against the department’s appropriations unnecessarily or without implementing and documenting proper controls.
“Consolidating these funds could streamline investments and benefit decisions and eliminate unnecessary, redundant administrative costs,” IML said in a release in February, “ensuring more money is available to fund pension benefits without reducing benefits.”
One of the proposals recommended by IML is a single downstate fund modeled on the Illinois Municipal Retirement Fund (IMRF), which it said is the second-largest and best-funded pension system in the state. IML said that consolidating funds would create efficiencies and streamline services to ensure financial contributions from taxpayers and employees go toward the pensions, rather than overhead or administrative expenses.
“Consolidating smaller pension funds into larger funds has been shown to generate greater investment returns,” Michael Inman, president of the IML board of directors, said in a release. “Additionally, consolidation will relieve some of the burden placed on taxpayers.”